WILL THE IRAQI DINAR REVALUE?

Despite the recent history of the Iraqi dinar being so weak, the potential for an Iraqi dinar revalue could be a game changer. A revaluation could take the currency out of the global currency basement, and put it back up on the main floor – where it had been for decades up until 1991.

But with or without revaluation, it should be considered that the weaker currencies generally have stronger upside potential than the more established ones. Iraqi dinar is about as low as it can go, and there are a number of situations that, were they to change significantly, could improve the exchange rate of Iraqi dinar practically overnight.

IRAQI DINAR REVALUE

Some investors see tremendous profit potential in the Iraqi dinar. But a large part of that anticipation is based on whether or not Iraqi dinar revalue. The currency has thus far been trading in a very narrow range, particularly during 2017. While the currency has shown stability, the likelihood of an increase in value compared with other currencies, particularly the US dollar, is heavily dependent upon Iraqi dinar revalue potential.

The presumption of course is that the Iraqi dinar revalue at a much higher level than it is right now. That’s actually a distinct possibility, when one considers the tremendous energy potential that Iraq has. This is true with both oil and natural gas. Oil is particularly important to Iraq, and it has the fifth largest oil reserves in the world, estimated at more than 143 billion barrels.

IRAQI DINAR REVALUATION

Will the Iraqi dinar revalue soon? It’s anyone’s guess at this point in time. The country is in a prolonged consolidation phase, following the US invasion of the country in 2003. New institutions are being built, and existing ones are being improved upon. But it’s a long, costly process.

There’s an excellent chance of an Iraqi dinar revalue at a much higher level. Apart from the situation with oil, which is Iraq’s main product and leading export, there’s a general sense the country has nowhere to go but up. That’s because following the devastation of the war, the country has largely had to rebuild from the ground up.

While much of the country remains damaged from the war and subsequent civil conflict, a massive rebuilding effort is underway. As the country’s infrastructure continues to improve and grow, there’s greater hope for the future of the country. The improvement that seems to be going in fits and starts in the present, could very well be building a national economic boom of the future.

Much depends as well on the internal political situation. Once again, that has been at least superficially stable in recent years. But the current political regime is also largely propped up by the continued US involvement in the country. There is considerable speculation as to the future of the country’s current leadership.

The country is beset with a significant number of local conflicts, owing to both regional and religious divisions that are inherent within the country. Unifying the country will take stronger leadership than what Iraq has had thus far. But if the country can develop that kind of leadership, there’s an excellent chance that Iraqi dinar revalue higher in the future, perhaps even considerably higher than where it is now.

WILL IRAQI DINAR INCREASE IN VALUE?

This question really depends on what factors affect dinar revaluation. Without a doubt, the biggest variable is the price of oil. For 2016, Iraq was the world’s fourth leading oil-producing country, exceeded only by Russia, Saudi Arabia and the United States. In fact, with a production of nearly 4.5 million barrels per day, Iraqi produces about half as much oil as the entire United States.

Despite the country’s current economic and political woes, it’s oil wealth looms large in its future. A sudden spike in oil prices, or a long-term trend in that direction, could immediately improve Iraq’s fortunes. As well, some sort of disruption in the global supply of oil could have Iraq well-positioned. Since it is currently a stable oil-producing nation, as well as being a wealthy one, Iraq could prove to be a major source of oil in a disrupted distribution chain.

It’s even conceivable that Iraq’s share of the global oil trade could increase significantly. This is possible due to the fact that not only does the country have enormous oil reserves, but the location and quality of that oil make it easily accessible.

A significant increase in oil, say to $100 per barrel or beyond, could change the entire outlook for an Iraqi dinar revalue. This will be especially likely if some of Iraq’s oil-producing neighbors become less reliable sources in the future.

The combination of higher oil prices, with relative stability within Iraq, could increase the flow of foreign capital into the country. That would certainly boost the value of the currency, perhaps even several times higher than it’s current level.

Despite the current limitations in Iraq, the country’s enormous oil wealth could very well prove the detractors wrong, and send its currency rocketing higher.

IRAQI DINAR REVALUE NEWS

There hasn’t been any substantial news in regard to a potential revaluation of the Iraqi dinar. The country is still trying to consolidate, both politically and economically. It is entirely likely that the Iraqi dinar revalue has been stalled precisely to keep the currency value low. As most investors know, countries either keep their currencies low compared to foreign currencies, or even devalue them, in an effort to encourage domestic growth.

But sooner or later the political and economic dynamics of the area, and especially within the oil industry, are likely to change. When they do, the Iraqi dinar stands to benefit in a major way.

This will be particularly true if there is a serious long-term spike in oil prices. The current weakness in oil, that’s taken global markets in recent years, could prove feeble. Within the past 40 years or so, oil has gone through cycles of several years of low prices. But that tranquility is always followed by major surges in the price. And when it does happen, it tends to happen quickly and substantially. Oil could easily go from $50 a barrel to more than $100 in a space of just a few months.

This would not be particularly good for the Western industrial democracies, who are dependent upon imported oil. But not only will higher oil prices benefit Iraqi dinar, but they will also make Iraq a more desirable place to invest and to do business. The combination of factors could send the currency spiraling higher, along with rising oil prices.

USD TO IRAQI DINAR 2017

In the past week, Iraqi dinar has actually strengthened slightly against the US dollar. As of October 11, it stands at 1,166.08 IQD = 1 US Dollar. Just one week ago, the exchange rate was 1,169 IQD = 1 US Dollar. That’s not a dramatic increase in the dollar value of Iraqi dinar, but it’s a step in the right direction.

Though Iraqi dinar have been stable against the US dollar throughout 2017, the situation could change going forward. In addition to the political, economic, and oil factors discussed above, another significant driver for Iraqi dinar could be a gradual devaluation of the US dollar. As that happens, Iraqi dinar can rise by default.

Even though the Iraqi currency wouldn’t be rising based on internal strength, it would still be increasing versus the dollar. That would mean that US-based investors, who hold the majority of their assets in dollars, would see a significant increase in the value of any holdings of Iraqi dinar.

An Iraqi dinar revalue situation could improve the exchange rate even more. But it may even be possible for the dinar to increase in value against the US dollar without the revaluation.

At that point, investors will be selling Iraqi dinar to cash-in on their profits.

IRAQI DINAR EXCHANGE RATE HISTORY

Iraqi Dinar exchange rate history doesn’t necessarily support substantially higher valuations in the immediate future. At least that’s the case looking at the currency since the 2003 US invasion.

Given today’s low valuations for the dinar, it’s easy to forget that prior to the Gulf War in 1991, the dinar was actually trading at an all-time high of more than three dinar per US dollar. At that level, the currency was worth about 4,000 times more than what it is right now.

In fact, the currency had been extremely stable versus the US dollar up to that point, at least since the early 1970s. It’s really been only since the Gulf War that the currency has fallen to exotic currency status.

But as any investor knows, particularly currency traders, status quo doesn’t necessarily last forever. Today’s exotic currency can become tomorrow’s stable currency, and sometimes even a desirable one. Once again, the political situation in Iraq, and the international situation with oil will be major factors as far as Iraqi dinar are concerned.

As well, a major X factor is the potential for an Iraqi dinar revalue. And of course, the likelihood of that event will largely be determined by the political situation and the global oil dynamic, the latter of which is largely beyond the control of the Iraqi government itself.